D
D7
Guest
I am nearing the completion of renovating a house I bought at the start of the year. My intention was to let the house out for a couple years and then move in myself. However, with all the news of increasing interest rates I have been contemplating the idea of selling now, waiting for interest rates to rise and then buying again.
My logic is based on the following example. A person can afford to pay 1100 pm in mortgage payments and at typical variable market interest rates of 3.5%, this allows them to borrow 240,000 to finance a house worth 260,000. So they and many others are in a position to bid on a house up to that price.
However, if in two years the interest rates rise by 2%, this would push standard variable mortgage lending rates to 5.5%. So putting this into the example above, the same person can still only afford to pay 1100 pm in mortgage payments, but at this interest rate it would only allow them to borrow 190,000 to finance a house worth 210,000.
I would appreciate other peoples thoughts on this as I think the figures are a bit scary. Does it not show how the banks are lending money with a short term view as opposed to medium to long term one. As a homeowner the last thing I want to see is a market crash but I can't help but wonder what might happen if rates do push up by one or two percentage points.
I got the figures in the examples using a mortgage calculator from an estate agents website.
My logic is based on the following example. A person can afford to pay 1100 pm in mortgage payments and at typical variable market interest rates of 3.5%, this allows them to borrow 240,000 to finance a house worth 260,000. So they and many others are in a position to bid on a house up to that price.
However, if in two years the interest rates rise by 2%, this would push standard variable mortgage lending rates to 5.5%. So putting this into the example above, the same person can still only afford to pay 1100 pm in mortgage payments, but at this interest rate it would only allow them to borrow 190,000 to finance a house worth 210,000.
I would appreciate other peoples thoughts on this as I think the figures are a bit scary. Does it not show how the banks are lending money with a short term view as opposed to medium to long term one. As a homeowner the last thing I want to see is a market crash but I can't help but wonder what might happen if rates do push up by one or two percentage points.
I got the figures in the examples using a mortgage calculator from an estate agents website.